Competitive Tendering in the Welfare State: Perceptions and Preferences among Local Politicians

Abstract

Competitive tendering for public services has triggered a heated academic debate. In political economy, competition is claimed to improve efficiency. If this is true, why are most governments faithful to the monopoly model? Political economists suggest that public sector employees and unions influence the preferences of the elected politicians. In new institutional theory, competition is claimed to undermine democratic governance. If this is true, why do some elected governments make use of competitive tendering? In this tradition, organisational solutions are seen as expressions of autonomous values and perceptions about the outcomes of organisational solutions – not as manifestations of vote–maximising politicians subject to self–interested interest groups. When governments use competition, it is due to misconceived management fads that have temporarily penetrated long–established perceptions and value systems.These propositions have not been subjected to proper empirical testing. We have analysed extensive data about Norwegian local politicians, and found support for the notion that the perceptions of elected politicians affect their preferences for tendering for residential care services for elderly people and hospital services. But we found support for the political economy propositions as well. Party affiliation, interest group background and economic situation influence the perceptions and organisational preferences of elected politicians. Reform may be a question of political values and perceived consequences, but these values, perceptions and policy preferences are influenced by political self–interest and can be changed by exogenous economic shocks.